Stellar Diamonds Regulatory News (STEL)

NOT FOR DISTRIBUTION IN THE UNITED STATES OR FOR DISSEMINATION TO US NEWS WIRE SERVICES.

4 May 2010

AIM: STEL

Stellar Diamonds plc

("Stellar" or the "Company")

ACQUISITION OF KONO DIAMOND PROJECT, SIERRA LEONE

Stellar, the London listed (AIM:STEL) diamond mining and exploration company focused on West Africa, is pleased to announce that it has reached agreement with Petra Diamonds Limited ("Petra") to acquire Petra's interest in the Kono kimberlite project ("Kono Project") in Sierra Leone, the remaining interest in which is held by Stellar's wholly owned subsidiary, Stellar Diamonds Limited.

Highlights

·; Acquisition of Petra's interest in Kono for an all share consideration of £900,000

·; Consideration to be settled by the issue to Petra of 4,500,000 Stellar ordinary shares

·; Petra to become a 4.45% shareholder in Stellar

·; Stellar and Petra to enter into a cooperation agreement

·; Kono trial mining produced over 4,200 carats in 2008/9

·; Kono Project presently on care and maintenance

·; Kono Project economics improving in line with rough diamond prices

Karl Smithson, Chief Executive of Stellar, comments:

"This deal is excellent for Stellar shareholders as we gain full control of the Kono asset, which we consider has the potential to become a long-term mine for the Company. This is in line with our growth strategy focused on the development of our kimberlite projects in West Africa.

"The Kono Project is among the most advanced in our portfolio with over US$17 million spent to date on the establishment of underground shaft and tunnel infrastructure, a 75 tonne per hour processing plant, earth moving machinery and on general exploration. The project has been on care and maintenance since May 2009, after the global fall in diamond prices. However, with the strong recovery in rough diamond prices, the Kono Project is an exceptionally well positioned development asset for Stellar to hold in its portfolio, offering growth to our future production pipeline.

"We also welcome Petra as a significant shareholder in Stellar and are pleased to reinforce our existing excellent relationship. The cooperation agreement that Stellar and Petra have agreed offers optionality to both parties, and we look forward to discussing partnerships on other Stellar projects in West Africa with Petra as and when appropriate opportunities arise."

Terms of Acquisition

Stellar will issue Petra with 4,500,000 new ordinary Stellar shares (at a price of £0.20 per share) for a total consideration of £900,000, in return for Petra's interest in the Kono Project, held via joint venture company Basama Diamonds Limited. Following the acquisition of Petra's interest, the Stellar group will increase its ownership in the Kono project to 100%.

The completion of the transaction is subject, inter alia, to the execution of a share purchase agreement and issue of the Stellar shares to Petra. On completion, Stellar's issued share capital will be 101,193,932 shares and Petra will become a 4.45% shareholder in Stellar. Petra has agreed (subject to certain exceptions) not to dispose of any of the Stellar shares for 12 months from the date of the signature of the share purchase agreement, which is expected to be before 14 May 2010.

Cooperation Agreement between Stellar and Petra

As part of the transaction both Stellar and Petra have agreed a cooperation agreement whereby Stellar will in good faith discuss with Petra the first option to joint venture any project in the Stellar portfolio which Stellar seeks to develop with a partner.

About the Kono Kimberlite Dyke Project

The Kono project is an underground trial mining operation targeting diamond bearing kimberlite dykes within two Exclusive Prospecting Licences covering an area of 206km2 in the heart of the Kono diamond district of eastern Sierra Leone.

The Kono district has historically produced a reported 9 million carats of high value gem diamonds, mostly by artisanal means, including the 970 carat Star of Sierra Leone. The Kono licence areas are directly adjacent to the Koidu Mine owned by Koidu Holdings, which hosts the largest established hard-rock diamond resource in Sierra Leone, with 2 million carats in the indicated and inferred category. The most recent public data on production by Koidu Holdings shows that Pipe 1 grades at 45 carats per hundred tonnes ("cpht") with a diamond value of US$231 per carat, whereas Pipe 2 grades at 26cpht with a diamond value of US$187 per carat.

During the successful joint venture, Petra and Stellar mapped some 17km of kimberlite dykes in the project area. A number of shafts were sunk to evaluate some of these kimberlites, with underground development focusing on two kimberlite dykes, designated Pol-K and Bardu. Over 4,200 carats of diamonds were produced by the joint venture during this phase of development work. The project was put on care and maintenance in 2009 after the global fall in diamond prices.

At Pol-K, the shaft is currently at a depth of 85m and trial stope mining has been conducted at a depth of between 35m and 65m. In-situ grades of around 65cpht have been consistently generated, with an average diluted "run of mine" grade of 38cpht. The three largest diamonds produced from Pol-K weigh 11.95, 11.45 and 10.55 carats.

At Bardu the shaft is currently at 45m depth and lateral development drives in the kimberlite have generated average in-situ grades of 66cpht, However the grade increased to 140cpht in the western most end of the development drive, which could be indicative of the commencement of a higher grade kimberlite zone. No trial stope mining has been conducted on Bardu to date.

Three diamond sales have been completed from the Kono project, with greatly varying prices realised before and during the economic crisis.

* Goods sold together so average value per carat has been calculated based on the pre-sale valuation.

Considering the continued improvement in the rough diamond market from mid-2009 to present, it is likely that the Kono goods would attract higher prices than the last sale conducted in June 2009.

For further information please contact the following or visit the Company's website at www.stellar-diamonds.com 

In accordance with the AIM Rules, the information in this announcement has been reviewed by Karl Smithson, CEO of Stellar, a qualified geologist with 22 years' experience.

Stellar Diamonds plc

Karl Smithson, Chief Executive Tel: +44 (0) 7783 707971

RBC Capital Markets

Martin Eales / Daniel Conti Tel: +44 (0) 20 7653 4000

Astaire Securities

Jerry Keen / Charles Vaughan Tel: +44 (0) 20 7448 4400

Pelham Bell Pottinger

Charles Vivian / James MacFarlane Tel: +44 (0) 20 7337 1500

About Stellar Diamonds plc

Stellar Diamonds plc is a London (AIM: STEL) quoted diamond mining and exploration company that has a portfolio of projects in West Africa. Two projects in Guinea are in production, Mandala and Bomboko, which provide cash flow to the Company.

Stellar also owns rights over four high-grade kimberlites that are the focus of further development. In Sierra Leone the Tongo and Kono projects comprise a series of kimberlite dykes, with the Kono project having produced 4,200 carats of diamonds through underground trial mining. In Guinea the Droujba kimberlite pipe and the Bouro kimberlite dykes are located in proximity to the Mandala mine and demonstrate grades of up to 200cpht and 500cpht respectively.

Forward-looking Statements

This press release includes certain forward-looking statements. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding the future plans and objectives of Stellar, are forward-looking statements that involve various known and unknown risks and uncertainties as well as other factors. Such forward-looking statements are subject to a number of risks and uncertainties that may cause actual results or events to differ materially from current expectations, including delays in obtaining or failure to obtain required regulatory approvals. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Any forward-looking statements speak only as of the date hereof and, except as may be required by applicable law, Stellar disclaim any obligation to update or modify such forward-looking statements, either as a result of new information, future events or for any other reason.